You can use some of your retirement savings without penalty to purchase
property in Costa Rica, here's how:
A Self-Directed Individual Retirement Account is an IRA that requires the account owner
to make investment decisions and investments on behalf of the retirement plan. You
are not limited to purchasing stocks or bonds with your retirement funds, even if you
are no where near the age of retirement. You are free to invest your funds in any
qualified investment including real estate, rental properties and even raw land. These
investments can be in the US or abroad.
IRS regulations require that either a qualified trustee, or custodian hold the IRA assets
on behalf of the IRA owner. Generally the trustee/custodian will maintain the assets and
all transaction and other records pertaining to them, file required IRS reports, issue
client statements, assist in helping clients understand the rules and regulations
pertaining to certain prohibited transactions, and perform other administrative duties on
behalf of the Self-Directed IRA owner for the life of the IRA account. Self-Directed IRA
accounts are typically not limited to a select group of asset types (e.g., stocks, bonds,
and mutual funds), and specialized self-directed IRA custodians will permit their clients to
engage in investments in most, if not all, of the IRS permitted investment types (an
almost unlimited array of possibilities including foreign real estate). Some of the
additional investment options permitted under the regulations include, but are not
limited to, real estate, stocks, mortgages, franchises, partnerships, private equity and
tax liens. Self-Directed IRAs, by allowing a wide range of investment choices, improve
the account owner's opportunities to diversify their IRA portfolio(s). Some investments,
such as life insurance or collectibles as defined by the Internal Revenue Service, are
not permitted in IRAs.
If real estate or any other investment asset held in a Self-Directed IRA has been
employed for personal use, or to gain any other personal benefit (other than a return
for the IRA), in the view of the IRS or the Department of Labor, the IRA(s) may become
immediately taxable. In addition, if the IRA owner is younger than 59 1/2, the IRA will be
subject to an early withdrawal penalty of 10%. It is important, however, to understand
that the IRA account holder is responsible for compliance with all codes and regulations.
While a custodian's job is to follow the directions of the account holder as a
non-discretionary trustee, a custodian cannot ensure compliance or give legal or tax
advice. Therefore, those interested in Self-Directed IRAs should seek education offered
by an unbiased source.
For more information on using your retirement funds to invest in property in Costa Rica,
please contact Steve Linder at Steve@Pacificlots.com.
IRS Rules and Regulations on Retirement Funds
New York Times Article about Self Directed Retirement Funds
New York Times Article about Using your IRA for "other" investments
Article on Real Estate Investment using retirement funds